Russia, the third biggest wheat
shipper last season, will run out of its 2012-13 exportable grain surplus of 10
million to 14 million metric tons in November, a survey of 10 exporters and
market analysts showed.
All 10 people said the supplies will
run out, potentially requiring Russia to impose an export restriction that may
include duties, according to the Bloomberg survey conducted over the past four
days. Wheat prices have climbed 41 percent this year on the Chicago Board of
Trade, as drought curbed crop prospects in top exporter the U.S., Russia and
Ukraine, the eighth biggest shipper.
Russia’s drought that started in May
will mean a wheat crop of 45 million tons, 20 percent smaller than last year,
the Agriculture Ministry said on Aug. 8. The government imposed an export ban
in August 2010 for 10 months after the worst drought in 50 years caused the
crop to be the smallest in at least the preceding 19 years, when the Soviet
Union collapsed and Russia became a separate state, according to the U.S. Department
of Agriculture.
“The Russian grain harvest is still
projected to more than cover domestic needs, but it’s unlikely that Russia will
export all the surplus grain when the harvest is so meager,” said Jenia
Ustinova, an analyst at New York-based Eurasia Group. “We believe export
restrictions may be imposed before the end of the calendar year.”
Wheat futures for December delivery
rose 0.3 percent to $9.1975 a bushel in Chicago by 4:18 p.m. in Moscow. The
price rose for the sixth time in seven sessions and is up 50 percent since the
most recent low of $6.11 on June 1.
Harvest Declines
The government cut the grains crop
forecast to 75 million tons from 75 million to 80 million tons, Agriculture
Minister Nikolai Fedorov said today in a television interview on Rossiya 24
channel in Moscow.
The harvest is down about 12 percent
year-on-year at 47.7 million tons due to drought which has destroyed 7.6
percent of crops, including grains and legumes, on more than 5.7 million
hectares (14.1 million acres) of fields, the Agriculture Ministry said on Aug.
21.
“It is highly likely that the
government will have to resort to some sort of export control method before
year’s end in order to combat wheat, flour and bread price inflation,” said
London-based Dan Hofstad, INTL FCStone Inc. (INTL)’s risk management consultant
for the CIS/Black Sea region. “The ultimate question is therefore when.”
Russia’s exportable surplus is seen at
10 million to 12 million tons and no export restrictions will be needed in
2012, Deputy Prime Minister Arkady Dvorkovich said on Aug. 8.
ZAO Rusagrotrans, the country’s
biggest grain carrier by rail, expects shipments to approach the government’s
upper surplus estimate by November. Russia is seen exporting 11.3 million to
11.5 million tons in the July through October period, said Igor Pavensky, the
company’s chief analyst.
Grain Shipments
Russia shipped 3.33 million tons of
grains from July 1 to mid-August, down from 4.08 million tons a year earlier,
according to Agriculture Ministry data.
Russia’s Grain Union Vice President
Alexander Korbut said it’s possible exporters will slow down shipments later
this year because high domestic prices will make sales inside the country more
profitable than sales abroad.
The pace of exports may slow to a
minimum because Russian wheat may not be competitive on the world market, said
Andrei Sizov Jr., Moscow-based researcher SovEcon’s managing director.
“Exporters are working even now at a profit margin that is close to zero.”
The drought in Russia’s main
grain-growing regions has raised prices in the country and certain exporters
have started selling central wheat to domestic millers in the northern areas
rather than exporting, some of the survey participants said.
Milling Wheat
Domestic millers were buying the
fourth-grade milling wheat, Russia’s main exporting variety among grains, from
farmers at 8,700 rubles ($273) a ton in the Southern Federal District in the
first week of August, according to the Institute for Agricultural Market
Studies, known as Ikar. The price went up to 8,750 rubles a ton last week in
the area, according to Russia’s Grain Producers’ Union data.
The domestic price is high for
exporters, who have to add about $45 per ton for grain transportation and
handling, according to an average estimate by the surveyed traders. The offer
price at the free-on-board basis in the Black Sea port of Novorossiysk would be
around $318 in that case, which can’t always win tenders, they said.
Egypt, the world’s biggest wheat
importer, bought 60,000 tons of Russian milling wheat at $313 a ton from Venus
International on Aug. 14. Eight other exporters from Russia failed to win the
tender because their offers ranged from $317.82 to $329.90 a ton.
Domestic prices in Russia may rise
further in the next two months, said Sizov and Oleg Sukhanov, Ikar’s chief
analyst.
Alternatives
If that happens Russia may sell 10
million tons of mainly wheat and barley until the end of 2012 and about 2
million tons of other grains, mainly corn and rice, until the end of the season
on June 30, 2013 with no export restrictions, said Vladimir Petrichenko,
director of Moscow-based OOO ProZerno consultancy.
“If an announcement of possible curbs
appears, this will stimulate export activity, and we’ll get quite another
result,” Petrichenko said.
Russia’s wheat exports are expected to
fall to 8 million tons this marketing year from 21.6 million tons last season,
the USDA estimated. That would make Russia the fifth biggest wheat exporter
after the U.S., Australia, Canada and the European Union, the USDA estimated.
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